Improvement Plans

for H Street Retail Shops

August 16, 2012

Andrew King, Talha Ocal, Mitsuru Misawa

Agenda

2

Summary

Overview of Current Situation• Future Timeline• SWOT Analysis• Store Expansion History• Leakage and Surplus Factor Analysis Recommendations• Increase Retail• Security/Safety• Sanitation/Cleanness• Transportation/Accessibility

Summary

3

Current Situation• H Street has great potential for retail shop owners.• Customers want more shops along H Street.• Restaurants have been saturated but growth continues.• Issues Recognized: Security, Sanitation, and Transportation

Strategies for H Street as a whole• Increase retail shops• Resolve three main issues

• Security/Safety Street Lamps, Security, Diversify businesses• Sanitation/Cleanness

Volunteering• Transportation/Accessibility

Partnership with Capital BikeshareParking and taxis

• Possible BID formation

Major Project Overview (Timeline)

4

2012• Construction of streetcar tracks from Node 1 to Benning

2013• Giant will open (in between 3rd St and 4th St)• Streetcars will start to run from Node 1 to Benning in

Summer 2013

[Long term future]• H street’s streetcars will reach Georgetown

http://www.dcstreetcar.com/fact-sheets.html

SWOT Analysis

5

Helpful Harmful

Internal

Strengths• Performing Arts Institutions anchor H Street economy.• Node 1 is close to Union Station, the largest station in

DC area.• Transportation infrastructure has been established

(road & sidewalk improvements); trolley starts in 2013.• The street has beautiful scenery and uniformity.• Many food options (i.e. American, Mediterranean,

African, Asian, etc)

Weaknesses• Nodes 2&3 are far from Metro (around 1.5 miles or

half an hour walking from corner of H St. and 15 th).• There are not enough parking lots.• Hopscotch bridge hides the street view from the

west, which may be a business barrier.• The corridor has 13 blocks, which makes people

use automobiles.• Empty lots and buildings cause negative

impression.• Small restaurants have saturated the corridor,

driving evening business only.

External

Opportunities• H Street region has residential and business growth

potential.• Streetcar will eventually be expanded along K Street.• Giant supermarket will attract people from outside the

immediate H Street region.• Although limited, there are available spaces for

parking.• Some of the retail types are not represented, there is

a chance to start new businesses.

Threats• Large national chains may damage small

businesses in the street as well as its scenery.• Retail shops in Union Station, especially food shops

and restaurants, are potential competitors.• NoMa and Capitol Hill BIDs are very close to H

Street, have been improving their business circumstances. They may be regional competitors.

• Lack of subsidy (ending RPAG) may lower attractiveness to entrepreneurs.

Retail Store Distribution/location

6

1 2 3

Node 1Capitol Fine Wine & SpiritsDynamic WellnessMetro MuttsMurry's Food StoreBeauty SupplyAspire Health StoreAdobe Design

Node 2Fashion OneJ & V PawnFamily LiquorShoe CityFoot LockerSports ZoneRite-AidT-MobileZ-MartRent-A-CenterH Street PharmacyKing's Beauty SupplyGameStopBoost MobileStan's Discount ClothingRainbowStylesDTLR FashionSusan Fashion

Jewelry Store

Men's Fashion CenterPK HardwareCricket WirelessPicture ThatDana Jewelry3 Point Teks7-ElevenC.A.T. BoutiqueSuper Pharmacy & Medical EquipmentNorth East Beauty SupplyConvenience GroceryThrift StoreDaily RiderMe & My SupermarketFamily DollarJumbo Liquor

Node 3Auto ZoneAtlas VetEuro StyleThrift StoreMike's Thrift StoreRasheedBaitul Khair

[This survey was done in July 2012.]

Retail Expansion

7

• Overall, Retail has increased

Node 1: 4 to 6Node 2: 12 to 36Node 3: 3 to 7

• 38 shops have opened• 8 shops have closed• Node 2 retail tripled

Data Sources:2009: WDCEP Report2012: Direct Survey

Node 1, 2009 Node 1, 2012 Node 2, 2009 Node 2, 2012 Node 3, 2009 Node 3, 2012

-5

0

5

10

15

20

25

30

35

40

New since 2009

Stayed Open

Closed

Retail Growth in the H Street Corridor, 2009-2012

Retail Store and Restaurant expansion

8

Motor Vehi-cle & Parts

Dealers

Furniture & Home Fur-

nishings Stores

Electronics & Appliance

Stores

Bldg Mate-rials, Gar-den Equip. & Supply Stores

Food & Beverage

Stores

Health & Personal

Care Stores

Gasoline Stations

Clothing & Clothing Acces-sories Stores

Sporting Goods, Hobby,

Book & Mu-sic Stores

General Merchan-

dise Stores

Miscella-neous Store

Retailers

Nonstore Retailers

Food Ser-vices & Drinking Places

Leakage/Surplus_x000d_Factor

88.4 100 77.9 45.5 11.3 31.1 80.6 -45.8 18.1 -31.6 -9.9 100 -54.5

-70

-50

-30

-10

10

30

50

70

90

110

Explanation of Graph• Negative (Surplus) – There is space for more customers at existing businesses.• Positive (Leakage) – Insufficient businesses to meet demand. Potential customers may go elsewhere.Implications• Clothing stores, restaurants, and bars are on the surplus side, which implies these categories may have been saturated.• Other categories are on the leakage side, which means H Street can attract more people if it has more businesses in these categories.

Leakage/Surplus Factor Analysis

Source: Retail marketplace profile by ESRI and Infogroup

Retail Stores and Restaurant expansion (cont)

9

Quality of Life Index

Amusement Index

Culture Index Earthquake Index

Education Index

Medical In-dex

Mortality In-dex (All

Causes)

Religion In-dex

Restaurant Index

Weather In-dex

20002 117 108 186 31 185 139 130 192 180 100

DC 117 85 196 35 181 138 104 196 192 100

United States

100 100 100 100 100 100 100 100 100 100

25

75

125

175

225

Quality of Life in 2010Q

ual

ity

of

Lif

e In

dex

Source: http://www.clrsearch.com/Washington_Demographics/DC/20002/Quality-of-Life

• Zip code 20002 area has almost same index number of restaurants as those in DC, and almost twice the national average.

• This graph implies that 20002 area may have enough restaurants, and that it serves as a “restaurant destination area.”

Recent Retail Survey Results

10

Attrac

tiven

ess

Cleann

ess

Enter

tainm

ent

Friend

ly Sale

speo

ple

Parkin

g

Price

of g

oods

/ser

vices

Qua

lity o

f goo

ds/s

ervic

es

Safet

y

Shopp

ing (i

n ge

nera

l)

Shopp

ing h

ours

Specia

l eve

nts

and

fest

ivals

Variet

y of

goo

ds/s

ervic

es

5.5%

10.4%

0.7%2.6%

9.5%

1.6%3.7%

16.4%

33.6%

23.5%

3.0%

23.8%30.6%

39.9%

7.3%

13.4%

20.2%

6.4%

13.5%

39.8%

52.9%

37.8%

13.2%

48.2%

39.6%

38.6%

20.9%

48.0%

44.7%

61.6% 44.8%

34.2%

11.3%

33.1%

32.2%

21.1%

23.0%

10.9%

50.7%

28.6%

22.8%27.7%

32.3%

8.2%

2.1%5.5%

36.3%

6.2%1.3% 0.3%

20.4%

7.4%2.8% 2.6%

5.8%1.3%

0.1%0.1%

15.3%

0.7%

How would you rate H Street for the following?

Poor Below Average Average Good Excellent

This survey shows:1. People are satisfied with entertainment and special events/festivals.

2. People want to shop more in H Street, and they want more variety of goods and services. In addition, they are satisfied with the price and ----quality of the goods and services they ----purchase.

3. More than half of the people think that the cleanliness of the street is lower than average. Cleanliness is one of the urgent issues to solve.

4. Also, about 60% of the people believe that safety in H street is lower than average. In addition, more than 60% of the people feel that shopping hours are short. Because customers may feel it is not safe around H Street at night time, store owners close early.

5. In summary, H Street has perceived safety and cleanliness issues.

Source: H Street Main Street Retail Survey done by Lauren Adkins

Summary of Current Situation

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• H Street has great potential for retail shop owners and the number of retail shops has been increasing since 2009.• Customers want more shops and variety along H Street.• Ordinary products seem to be needed rather than expensive or luxury goods.• Restaurants have been or are being saturated.

• Three primary issues were identified.• Security/Safety• Sanitation/Cleanliness• Transportation

Strategies/Recommendations

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Retail Store Strategies for H Street

Forecasting: Retail Store Increase

13

• Based on the numbers of retail shops in 2009 and 2012, retail store expansion can be simply forecasted as above.

Node 1: 7 (2013) to 7 (2014)Node 2: 44 (2013) to 52 (2014)Node 3: 8 (2013) to 10 (2014)

• In the current situation of H Street, this forecast should be realistic.• However, by simply walking down H Street, it is apparent that the

vast majority of new construction is restaurants.

Node 1, 2009

Node 1, 2012

Node1, 2013

Node1, 2014

Node 2, 2009

Node 2, 2012

Node2, 2013

Node2, 2014

Node 3, 2009

Node 3, 2012

Node3, 2013

Node3, 2014

To-tal

4 6 6.66666666666

667

7.33333333333

333

12 36 44 52 3 7 8.33333333333

333

9.66666666666

667

5

15

25

35

45

55

4 66.666666666666677.3333333333333312

36

44

52

378.333333333333339.66666666666667

Retail Expansion Forecasting (2013&14)

Source: http://www.mta.info/news/stories/?story=762

Issue: Security/Safety

14

Total

Crime

Risk

Mur

der R

isk

Pape

Risk

Robbe

rry R

isk

Assau

lt Risk

Burgla

ry R

isk

Larc

eny

Risk

Mot

or V

ehicl

e The

ft Risk

1.88

5.72

1.81

5.63

3.54

1.31 1.29

4.56

1.81

6.47

1.21

4.7

2.85

1.121.42

3.83

1 1 1 1 1 1 1 1

Crime Risk Index

20002 Washington DC National

Nationwide average crime numbers are indexed at 1, and compared to average levels in 20002 and DC as a whole.

Crime Statistics: http://www.fbi.gov/stats-services/crimestats

• 20002 area has higher rates of some types of crime than DC.

• This data coincides with the survey.• Bars on front doors may cause

people to feel insecure.• Gates keep the restaurant and bar

crowd from recognizing retailers

• Possible Solutions:• Increase street lamps• Replace bars and gates with

protective window wrap• Hire private security• Increase police patrols

• All these solutions require funding: capital improvements require large payments up front, and patrols require funding in perpetuity

Issue: Security/Safety

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Low visibility of retailers at night is a negative – we want to capitalize on the vibrant night life of the corridor as much as possible!

Expanded retail hours (The Daily Rider)• Increased convenience for customers• Increased visibility of business could help with growth

Shared front end space / multi-use space• Shared storefronts: branching out

• Dynamic Wellness & Raw Juice Bar• Sidamo’s recent “Lending Library”

• Restaurant or bar hosting Trunk Sales during the daytime• A vacant building could be rented out as a venue for traveling

sales, suit fittings, etc

Issue: Sanitation/Cleanliness

16

Recommendation: Clean Team Volunteers• Gathering volunteers to form clean teams is one solution• Consistency and sustainability are a concern• Volunteer labor may work better on a specific-project basis

Another solution: BID formation• Forming a BID may also work to address these issues • The stable funding of a BID would help ensure sustainable

Clean Team activity

Issue: Transportation/Accessibility

17

Recommendation: Capital Bikeshare

• Streetcars: Will run through H Street NE, but the west end is at 3rd St NE. Streetcars cannot pull people from downtown DC to H Street.• Trains and buses: Changing and/or adding lines would be expensive and the decision making authority rests with other agencies. These alternatives are not realistic.

Promoting and advertising Capital Bikeshare may be the best alternative.• Already established: Numerous existing stations and aggressive expansion of the program• Inexpensive fees

• First 30 minutes for free (for members)• Popular with both tourists and locals

Issue: Transportation/Accessibility

18 Source: Capital Bikeshare 2011 Member Survey Report June 14, 2012

Recommendation: Capital Bikeshare

Capital Bikeshare is not fully utilized in H Street Areaeven though it is difficult to access the area for people who do not have cars/automobiles.There is much space to utilize Capital Bikeshare in HStreet.

How to promote?Becoming a sponsor of Capital Bikeshare might not work, since only one fifth of the people are aware that the DC government and other institutions are sponsors of Capital Bikeshare.

However, collaborating with Capital Bikeshare wouldwork by, for example,1. Giving one day pass as gifts/rewards to H Streetcustomers.2. Spreading ad papers for H Street around UnionStation, Chinatown and elsewhere.

Issue: Transportation/Accessibility

19 Source: http://capitalbikeshare.com/stations

H Street NE already has four Capital Bikeshare stations,but to increase density and convenience, one

or two more stations can be added.

Issue: Transportation/Accessibility

20 Source: http://capitalbikeshare.com/stations

Parking options• Look into possibility of grant funding for turning vacant

lots into parking areas• Mixed use of the incoming Giant parking garage which

will have 250 – 270 parking spots

Taxi Stand• For many errands, or for parents, Bikeshare won’t work• Partner with a private company to have a taxi stand in a

central and convenient location

BID Formation

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BID formation• BID can help fund security and sanitation solutions• Community support is required

H Street can satisfy this requirementAssessment (funding) comes from communityBID could provide services similar to Main Street

• Existing 8 BIDs in DC and BID Council may be informative in terms of expenses, services, and best practices

BID Formation

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Existing 8 BIDs Financial Data

H Street Area

• There are 8 BIDs in DC• Most BIDs disclose their financial information in annual reports• Some data obtained from 990’s

Source: http://www.dcbidcouncil.org/map/

Adams Morgan Capital River Capitol Hill Downtown Georgetown Golden Triangle Mount Vernon NoMaIncome BID Assessments 1,572,666 3,177,475 4,576,979 546,413 1,735,134Other 33,051 167,573 103,792 92,850 227,535Total 616,460 1,605,717 1,309,659 10,384,523 3,345,048 4,680,771 639,263 1,962,669 Expenses Administration 204,382 317,634 882,981 1,007,347 542,021 719,198 371,953 304,415Marketing 148,059 1,336,918 979,274 435,602 39,316 389,075Cleaning&Safety&Maintenance 511,249 5,480,131 924,880 1,881,126 141,090 742,256Infrastructure 796,165 695,247 403,906 249,431Community Building 150,216 241,424 Economic Development 222,424 680,335 Transportation 80,309 443,864 Other 66,912 592,855 124,739 97,400 150,622Total 1,496,803 10,337,615 3,141,422 3,805,995 649,759 1,835,799 Administration/BID Revenue Ratio 33% 20% 67% 10% 16% 15% 58% 16%Administration/BID Expense Ratio 21% 10% 17% 19% 57% 17% Blocks 8.5 100 20.25 120 35.5 43 19 35Blockfaces 34 400 81 480 142 172 76 140 Clean&Safety&Maint cost per blockface n/a $1,278 n/a $11,417 $6,513 $10,937 $1,856 $5,302 Administration cost per blockface $6,011 $794 $10,901 $2,099 $3,817 $4,181 $4,894 $2,174 Administrative Staff 1 6 3 42 7 9 2 6Hospitality Staff 1 2 4 45 8Maintenance Staff 5 7 20 42 12 40 6 13

Limitations of Corridor Financial Analysis

• Data Availability• Lack of historical property data means no accuracy in forecasting • Lack of SF / linear frontage in OTR data• Leads to use of “Assessed Value” model for projecting assessments

• Assumptions• Relative stability of assessed values• Same assessment method used for each corridor• Costs for similar services do not vary across BIDs

• Future Analyses• Compare multiple assessment models: LF, SF, Assessment, Hotels• Different assessment models are more appropriate in different areas• Always keep in mind: resident/merchant impact!

Corridor Analysis: H StreetAssessed Value Model$120 per residential unit$0.15 commercial rate per $100 assessed$0.05 vacant rate per SF Land Area

H Street, 2011 # registered Land Area Assessed Value Mean ValueRestaurant 20 35,014 11,194,580$ 559,729$ Retail 127 418,262 99,247,210$ 781,474$ Commercial 23 243,319 110,590,220$ 4,808,270$ Parking Lot 18 87,976 21,259,100$ 1,181,061$ Vacant 57 148,451 26,844,270$ 470,952$ Other 11 99,377 25,728,390$ 2,338,945$ Residential Single Family 748 1,191,788 567,071,460$ 758,117$ Residential Multifamily 588 267,414 240,899,340$ 409,693$ Apartment Units 229Total 1592 2,491,601 1,102,834,570$

Data Source: 2011 OTR data

Projected Annual BID Assessment: $372,450Mean daily cost to H St restaurant: $2.30

Mean daily cost to H St retailer: $3.21

BID Formation

25

Human Resource Expense Assumption

• Benchmark: Mount Vernon (because of similar area and business size)• 2 administrations and 6 maintenance stuffs• Assume there are five positions: executive, full-time assistant, part-time assistant, cleaner, and landscaper

• In H Street corridor, In total 6 members should be enough for cleaners and landscapers.• Total HR cost depends on how many people are needed for administrations.• Also, other expenses should be considered.

HR Cost Admin/HR Cost

Executive$70,000

Assistant (FT)$50,000

Assistant (PT)$35,000

Cleaners$40,000

Landscapers$40,000

Mount Vernon(Benchmark) $360,000 33.3% 1 1 0 3 3

Assumption 1

(No PT assistant) $360,000 33.3% 1 1 0 4 2

Assumption 2(1 PT assistant) $395,000 39.2% 1 1 1 4 2

Assumption 3(2 PT assistants) $430,000 44.2% 1 1 2 4 2

26

• The idea: Because BIDs cause property values to increase, set up a TIF to capture that value in order to help fund the BID

• The model: “Low-growth” or normal model for 10 years for corridor compared to “Higher-growth” post-BID model for same time frame and area

• The result: The NPV of the difference in tax revenue is the “incremental gain” which is then adjusted for a general fund carve-out to establish the TIF fund.

• This is a small TIF because the growth models are very conservative.

TIF model

27

TIF Model Assumptions

Discount Rate 5% Tax RatesHomestead Exemption Does Not Change Property Tax Class I Residential $0.85 per $100Owner Occupancy Rate Does Not Change Property Tax Class II Commercial $1.85 per $100General Fund Carve-Out 50% Property Tax Class III Vacant $5 per $100

Homestead Exemption $67,500 /Occupied Unit 64% Owner-occupied

Growth Rates Restaurant/Bar Retailer Commercial Vacant Residential Multi Residential Single Homestead ExemptionBase CaseAnnual (continuous) 2% 2% 2% -6% 2% 2% 3%Initial (from BID foundation) 0% 0% 0% 0% 0% 0% 0%With BID formedAnnual (continuous) 4% 4% 3% -10% 2% 2% 3%Initial (from BID foundation) 3% 3% 3% 0% 0% 0% 0%

Growth rates are estimates, need historic data to be able to forecast Currently uses the H Street Corridor, but could be adapted to other corridors

28

TIF Subsidy PaymentsTIF money establishes a fund and uses an amortization table to fund BID activity during a multi-year setup period. This takes the initial burden off of their constituents and creates a funding mechanism with a definite end.

NPV Gain $2,618,296.19General Fund Cut $1,309,148.09Net from TIF $1,309,148.09

5-year SubsidyTIF Portion 100% 80% 60% 40% 20% 0% 0% 0% 0% 0%

0.33 436,383$ 349,106$ 261,830$ 174,553$ 87,277$ -$ -$ -$ -$ -$ BID Tax Portion 0% 20% 40% 60% 80% 100% 100% 100% 100% 100%

-$ 38,242$ 141,012$ 244,403$ 348,437$ 453,143$ 471,268$ 490,119$ 509,724$ 530,113$ Estimated Individual Tax BurdenRestaurant -$ 242$ 504$ 786$ 1,090$ 1,416$ 1,473$ 1,532$ 1,593$ 1,657$ Retailer -$ 338$ 703$ 1,097$ 1,521$ 1,978$ 2,057$ 2,139$ 2,225$ 2,314$

8-year SubsidyTIF Portion 100.0% 87.5% 75.0% 62.5% 50.0% 37.5% 25.0% 12.5% 0% 0%

0.22 290,922$ 254,557$ 218,191$ 181,826$ 145,461$ 109,096$ 72,730$ 36,365$ -$ -$ BID Tax Portion 0.0% 12.5% 25.0% 37.5% 50.0% 62.5% 75.0% 87.5% 100% 100%

81,528$ 132,792$ 184,651$ 237,130$ 290,253$ 344,047$ 398,538$ 453,754$ 509,724$ 530,113$ Estimated Individual Tax BurdenRestaurant -$ 151$ 315$ 491$ 681$ 885$ 1,105$ 1,341$ 1,593$ 1,657$ Retailer -$ 211$ 440$ 686$ 951$ 1,236$ 1,543$ 1,872$ 2,225$ 2,314$

29

THANK YOU!A n y Q u e s t i o n s ?

30

Appendix: Alcohol Moratorium• One possible strategy to stabilize the number of restaurants and bars

in the corridor is a moratorium on licenses to serve alcohol• The procedure for this involves a petition by community organizations• Covering the entire corridor would require two moratorium zones• This strategy is not recommended unless restaurants and bars begin

“taking over” the neighborhood and become a legitimate nuisance